Comments on: Will there be capital markets for equity in people?

By: Gregory Rader

Gregory Rader — Mon, 31 May 2010 17:54:47 +0000

Thanks for the response. I definitely look forward to seeing if and how this potentially develops…

By: Ross Dawson

Ross Dawson — Sun, 30 May 2010 03:36:40 +0000

Gregory, thanks for sharing your thoughts on this – very interesting.
On the shift away from publicly traded equity first, these are good points, though one other important factor is simply that in a deconstructed economy smaller companies represent a larger share of the economy.
On the personal equity front, your logic is sound and you may well be right. However it could create a lot of value if an investor were prepared to pay upfront for a share of an individual’s future earnings, thus enabling the trade for training and development. Perhaps a combined role of coach and investor could emerge, though that investor would still be prepared to pay for training for the individual they’ve invested in.
This is going to take a while to pan out if it ever does, so we’ll have a bit of time to mull over these fascinating issues :-)

By: Gregory Rader

Gregory Rader — Tue, 18 May 2010 22:16:46 +0000

Hi Ross,
I commented on this post on twitter:
“I expect people more likely to trade equity for coaching/training rather than $, then invstmnt is directly related to the asset”
and you responded:
“that makes a lot of sense – definite alignment of interests – tho trainers wd want ST payment so need financial vehicles”
After mulling this over for a couple weeks I think I want to argue that investors in search of short term liquidity are fundamentally not the right type for this potential market. Some investments are naturally amenable to secondary trading and therefore to providing short term liquidity. These are primarily investments in assets that are relatively easily valued, that minimize principle/agency problems, and that therefore have little correlation between valuation and the level/quality of investor oversight or active management.
It seems to me that equity positions in individual future earnings fail all three tests. I would expect these markets to act much like the VC/angel markets, where active involvement and long term investment is the expectation and valuation is made largely on the basis of future business potential assuming the investor’s long term support.
In your post you state:
“A decreasing proportion of value creation in the economy is in stockmarket-traded companies.”
I fully agree with this claim and I think in large part this trend must be due to the three factors I mentioned above:
-Decreasing transparency of future earnings
-Increasing relevance of principle/agency problems
-Increasing benefits of effective active investor management
I would be very interested to see you expand on your take whenever you get around to thinking about this again.
Thanks
Greg

By: Ross Dawson

Ross Dawson — Wed, 05 May 2010 03:44:37 +0000

Hi Axel, yes totally agree.
This is very close to the idea of reputation measures – we will have more evidence for how good we are at creating value in a networked economy.

By: Axel Schultze

Axel Schultze — Tue, 04 May 2010 15:40:49 +0000

This is a fascinating topic. In 2007 I started to work on the concept of “Social Capital Value” aggregated by individuals and demonstrating it as a personal asset. This was in part inspired by French sociologist Pierre Bourdieu and the 2001 World Bank Report about Social Capital. The World Bank discovered that highly connected and socially interacting societies are more likely to return the loans than those countries who are less social.
Transforming social skills into social assets is one way to build an equity like position. And while it’s not very likely that there is an stock exchange for personal equity, I guess we are on the verge to be more conscious about social and personal equity than ever before.
With all that said, there may actually develop something that could be viewed as a personal equity market – and if it is not a trading market, it could become a key value indicator like credit scores or other scores.
Axel
https://xeesm.com/AxelS